Most individual investors willing to trade and invest in stocks are a unique group willing to spend a great deal of time researching company earnings, marketing data and chart technical analyses. These individuals often seem more willing to accept a higher level of risk than those investing more heavily in bonds, mutual funds and ETFs or those allowing others to invest their money for them. With each group of personalities there are always extremists. For the stock investment world, there are few better examples of stock trading extremists than biotech investors. These individuals have diverse and at times sophisticated approaches to trading and investing such as the "BioRunUp" method. This method entails opening a long position in a biotech security with expected clinical data, regulatory decision or other major catalyst coming up and hoping the share price runs up in anticipation of the catalyst. They then may close their position and secure their gains right before the catalyst or at a pre-determined sell point. For the real thrill seekers, traders may try to ascertain a drug's chance at either approval or positive trial data and open a long or short position and hold through the catalyst hoping to sell their long position at a spike or cover their short position at a dip depending on how the catalyst unfolds. Giving testament to the risks associated with biotech trading, terms such as shorts, longs, puts, calls, and others are all prevalent in this field in addition to complete response letter, FDA approval, IND, stock offering, acquisition, partnership, NDA and a host of others. Often ignoring the financial condition of these companies, biotech traders typically more heavily rely on the "what ifs" of the field by leaning on the potential value for the companies.
Biotech traders may trade in and out of their positions quickly and frequently. However, biotech investors may not have the time or inclination to jump in and out of positions and rather most choose to methodically pick their way through the many biotechs in the field and select a few that are construed as "investment grade." For these investors, more research often goes into their decision making as they may opt to hold through several catalysts with their stock price dips and spikes, regulatory decisions, company acquisition or partnership, or even drug earnings depending on their reasons for holding the position for the longer term. With their picks, as with any sector investor, diversification is often key and can offset the risks associated with investing too heavily in any particular indication or drug mechanism. For investment diversification consideration as well as trading potential due to upcoming catalysts, following are some biotechs in advanced trials for differing indications looking to have potentially solid 2012 and 2013 ahead of them.
Breast Cancer HER2 Targeting Immunotherapy
With almost 300,000 new diagnoses annually, breast cancer treatment is a huge area of need and represents a substantial market with Roche-Genentech's Herceptin currently taking a big piece of the pie with $5 billion in revenue in 2010 and then again in 2011. Biotech hopeful Galena Pharmaceuticals (GALE) hopes to secure an even bigger share of the market than even Herceptin with its NeuVax E75 immunogenic peptide of HER2, which stimulates cytotoxic T lymphocytes (CD8+ T cells) to attack and kill HER2 1+ and 2+ (low to intermediate) expressing breast cancer cells. Of particular significance is that Herceptin is currently only approved for HER2+3 (high expression HER2) tumor expressions, a condition in 25% of breast cancer patients while NeuVax is currently intended for HER2+1 and HER2+2 (low and intermediate expression). With all HER2 over-expressions representing 75% of breast cancer sufferers, the remaining potential there is substantial. Phase II data supporting NeuVax was impressive with a subset of 53patients that received booster inoculations having particularly strong efficacy. These patients experienced a disease-free survival rate of 95.9% versus the control group's 79.7% (p=0.016). The additional doses given at six-months intervals kept the immune response from waning and did not detract from the drug's safety profile. The perspective trial data set is particularly strong as it represents data from a five-year study, a robust and mature trial.
Galena announced enrollment initiation on January 20th of this year for its NeuVax Phase III follow up trial termed the PRESENT trial for Prevention of Recurrence in Early-Stage node-positive breast cancer with low to intermediate HER2 Expression with NeuVax Treatment. As interim data from this trial begins to make its way into Galena's company updates and data presentations in various venues, investors will begin taking their positions for the short, medium and long terms. Early Phase III success in the trial will be a huge catalyst for this company with the huge market potential for this drug already having impressive Phase II safety and efficacy data behind it. The company recently announced an $11.6 million offering to be used for working capital and other general corporate purposes, including the Phase III NeuVax clinical trial, Phase 1/2 clinical trials of Foliate Binding Protein-E39 (FBP) and an additional Phase II trial of NeuVax in combination with Herceptin. With this financing behind them, this presents new investors a unique opportunity to initiate a long position in a biotech security with share dilution behind them at least for the interim.
Targeting and Prevention of Side-Effects of Surgical Procedures at Surgical Trauma Sites
Without knowing anything about a biotech's pipeline or indications, an investor can review the company's stock chart and ascertain that something big is happening or coming. Omeros Corporation (OMER) shareholders have enjoyed a more than 150% stock price run-up with a recent dip back down to $9.2 from its peak of more than $10 after trading at about $4.00 in early January. Speculation can drive any biotech up for a brief period; however being able to hold those gains for over three months typically requires something more substantial than only speculation. Omeros' lead drug candidates utilize their proprietary PharmacoSurgery platform to improve patients' recovery from arthroscopic, urological, ophthalmological and other surgical and medical procedures. Using therapeutics already approved, the technology involves administering these therapeutics agents in pre-dosed, pre-formulated and single-use containers that are easily incorporated into standard surgical irrigation solutions without surgeons making any changes to their operating procedures. These drugs, which are usually used to reduce inflammation and other side-effects, are applied preemptively to ward off problems rather than their normal system of treating them after they have occurred. These conditions include inflammation, spasms, pain, loss of function and other problems all of which cause discomfort and even slow the healing process as the patients are often unable to keep the wounds or incisions from being disrupted due to movement.
With the obvious huge marketing potential for the indication, it's little wonder why investors are beginning to take note of the company. Omeros has two drugs in Phase III trials currently, OMS302 and OMS103HP. OMS302 is intended for use in surgical irrigation solutions for patients undergoing cataract or refractive lens replacement procedures. The company recently completed the first Phase III trial in which the therapy proved to be highly effective and demonstrated statistically significant superiority over placebo in maintenance of intraoperative mydriasis (p<0.00001) and reduction of postoperative pain (p<0.00001). It has since began enrollment in a second Phase III trial for the same indication, and the company is preparing to begin operating as a revenue generating company rather than just a development Phase company. Data from this trial is expected in 2H 2012 for its 400 patient set, giving testament to this huge area of need as enrollment completion is expected to happen quickly with the trial data following. OMS103HP is intended for use in patients undergoing arthroscopic surgery and uses anti-inflammatory/analgesic active ingredients to improve post-operative joint function and reduce pain. The Phase II OMS103HP trial yielded favorable results with the company reporting "clinically meaningful and significantly greater efficacy than vehicle as measured by VAS pain scores, passive knee flexion and patient-reported functional scores using the KOOS. The patient-reported outcomes scores showed a sustained benefit through postoperative Day 90 across all five KOOS subscales." The Phase III OMS103HP trial has competed enrollment and data is expected in 2H 2012 as well. With 2 Phase III data sets expected in 2H 2012, a scale up for production scale batches of OMS302 likely coming soon, and with its recent news on its GPCR program and its implications, Omeros has an exciting 2012 ahead of it and could be a nice addition to a biotech investor's portfolio.
Targeting Chemotherapy Induced Nausea and Vomiting (CINV)
Depending on many factors, CINV has the potential to affect up to 90% of all patients receiving chemotherapy. If untreated, the condition can result in a delay or discontinuation of the treatment regimen in some cases for cancers aggressively spreading and needing prompt treatment. With sales of cancer drugs doubling from 2005-2010 and projected to continue growing at an 8% rate annually, the industry leads the pharmaceutical industry growth with sales expected to reach $93 billion by 2016 according to an article in Reuters. While hopes in stem cell, immunotherapy, growth inhibitors and other mechanisms exist, chemotherapy remains a standard of care for many cancers and will remain the best option for at least the next few years. While the cytotoxic nature of the drug is something inherent in the technology, CINV is currently being fought via a standard of care of a 5-HT3 receptor antagonist in combination with the corticosteroid dexamethasone. A hopeful improvement to the current standard of care exists in OPKO Health's (OPK) rolapitant which just which just began enrollment in two Phase III trials according to an April 12th company press release. The trials will evaluate rolapitant plus the standard of care versus a placebo plus standard of care to evaluate the drug's efficacy in controlling CINV in HEC (highly emetogenic chemotherapy) in one trial and MEC (moderately emetogenic chemotherapy) in the second trial. Results for each of the trials will be released in 2H 2013 with likely interim data before then, although the study is double-blinded. The stock is trading at support and represents another potentially good entry in a company with a unique pipeline. With a $1.29 billion market capitalization, the company doesn't likely have the upside potential that Galena and Omeros do. However, it does have the added advantage of more stable finances and a more diversified product line of pharmaceutical products, vaccines and diagnostic products.
The biotech sector remains a risky but potentially lucrative sector for traders and investors willing to brave the risks. Like any other investment, one way to avert some of the risks is through diversification. The three companies presented above represent dramatically different drugs targeting differing indications and represent a good group for diversification purposes. As icing on the cake, however, each of these three companies is involved in indications with huge areas of need representing potentially large marketing opportunities and corresponding share price increases as their drugs' trial data becomes available and their pipelines become solidified and legitimized. Although not as likely for the $1.3 billion market cap OPKO Health; Galena Pharmaceutical and Omeros Corporation also have the added shareholder advantage of being good targets for acquisition as Big Pharma is likely eying both companies due to their novel pipelines and marketing potential. The biotech sector is an exciting and profitable investment for those dedicated to all the work involved to research and interpret all the catalysts coming for each security. These three companies have exciting futures ahead of them for investors and for the patients making up the unmet or under met areas of need for each indication.
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.